Clarification: What’s at stake for the US Biofuel Blending Act in 2022 and beyond

NEW YORK, Jan 11 (Reuters) – The U.S. biofuel blending program known as the Renewable Fuel Standard (RFS) may see its most transformation so far in 2022, as the Biden administration must make decisions to reset the laws that mandate blending. Renewable fuels in the United States.

The program is designed to allocate certain quantities of renewable fuels to replace or reduce petroleum fuels. Oil refineries, required to blend billions of gallons of biofuels into their fuel mix, say the program is too expensive and must be curbed, while corn growers and biofuel producers love the standards, because they have helped build a multi-billion-gallon market for their products.

What is RFS?

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Congress created the RFS in 2005 and expanded the program in 2007. It is administered by the Environmental Protection Agency (EPA).

At the start of the program, Congress set annual volume requirements targets for the program’s renewable fuels through 2022. Currently, the proposed 2022 demand volume is approximately 21 billion gallons.

Refineries that do not blend biofuels can purchase tradable credits, known as RINs, from those that do to demonstrate compliance with mandates.

Some oil refineries were exempted from the requirements in previous years because they were able to prove financial harm, in what are known as small refinery exemptions.

What will happen in 2022?

This year the EPA will have to decide on the next phase of the program in coordination with the Department of Energy and the Department of Agriculture.

The EPA plans to propose requirements beginning in 2023 in May this year, with the final rule coming in December.

What do stakeholders want from the new requirements?

Scott Irwin, professor of agricultural and consumer economics at the University of Illinois, said corn growers and biofuel producers want the EPA to raise required blending amounts of renewable fuels.

Meanwhile, refiners say program costs are too high and threaten jobs and businesses at smaller refineries.

“The crude refining side wants to grant a permanent reduction in the RFS so that growth in biofuels is primarily market-driven and not mandates,” Irwin said.

What are the plans of the Biden administration?

It’s too early to say how the administration will approach finalizing its proposals. However, there are many factors that could play a role.

Oil prices and gasoline costs for American motorists soared to multi-year highs last year, and with the midterm elections looming, the administration is wary of impeding oil production and oil-dependent fuel supplies.

However, the White House has set strict goals to reduce carbon dioxide emissions and combat climate change. The RFS could be a key tool in this battle going forward, by stimulating the production of renewable fuels. The White House must balance the interests of refining labor unions, farmers, and consumers.

Is there anything else in the US at play?

There is some uncertainty about what exactly the RFS program could include in 2023 and beyond.

A senior official told Reuters in December that the Environmental Protection Agency was considering making power generation from electric vehicles eligible for renewable fuel credits, after the White House directed the agency to study how using renewable fuels to power electric vehicle charging could generate tradable credits. Read more

The move could boost the US electric car industry, which only accounts for roughly 2% of the US car fleet.

It is also unclear how the program will include exemptions for small refineries in the future. The Environmental Protection Agency recently proposed denying 65 pending applications for exemptions, but the action is not final. Read more

Some have speculated that the program would be less focused on ethanol from corn, the most widely used biofuel and a major leverage in the industry, and instead around advanced biofuels such as renewable diesel made from vegetable oils or animal fats.

“I don’t think there is any doubt that the future path will be towards advanced biofuels,” Irwin said. “What will be interesting to see in the reset is how it handles progression versus traditional.”

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(Stephanie Kelly reports)

Our Standards: Thomson Reuters Trust Principles.


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